You know that the after-tax cost of debt capital for Bubbles Champagne is 5.40 percent. Assume that the firm has only one issue of five-year bonds outstanding. The bonds make semiannual coupon payments and the marginal tax rate is 30 percent.
Calculate Pre-tax cost of debt capital?
What is the current price of the bonds if the coupon rate on those bonds is 7.71 percent?